After a record-breaking year in which the Japan-Korea Marker topped $30/MMBtu, it looks like 2022 could finally be the year when multiple projects in the long-awaited “second wave” of North American LNG export facilities reach final investment decisions. Developers, financiers, and offtakers are all taking their time, however, to make sure projects make sense in the long term. The recent run of high prices comes after years of price declines and a COVID-related price collapse in 2020, which reduced the spreads between U.S. production and LNG destination markets, slowing the pace of LNG project development. One thing’s clear: Asia — always the focus of LNG demand growth — will become even more important going forward, and perhaps the best way to attract Asian offtakers to U.S., Canadian, and Mexican projects is to export from the Pacific Coast, assuming that feedgas can be sourced and delivered easily. In today’s RBN blog, we conclude our series on Pacific Coast LNG export development, this time focusing on projects in Western Canada.
We began this series by discussing the logistical and economic advantages of exporting North American LNG from the Pacific Coast, as opposed to the Gulf Coast (see Part 1). The shorter voyage times and lower costs for Asian offtakers have spurred interest in these projects. Then, in Part 2, we outlined four projects, two that have already reached FID and are under construction — LNG Canada in British Columbia and Sempra Energy’s Energía Costa Azul (ECA) LNG in Baja California, Mexico — as well as two projects in strong contention to take FID in the next year: Woodfibre LNG in British Columbia and Mexico Pacific Limited (MPL) in Sonora State. In Part 3, we covered feedgas plans for the two projects in Mexico and how they plan to utilize existing infrastructure to pipe in Permian gas from the U.S. We also discussed some of the challenges, namely limited pipeline capacity moving west, and more broadly, how pipeline connectivity in Mexico limits site options for future LNG development beyond ECA and MPL. Next, we turn to the status and prospects of LNG development in Western Canada, and specifically on LNG Canada and Woodfibre LNG.
LNG Canada is a two-train, 14-MMtpa (1.85 Bcf/d) terminal under construction in Kitimat, BC. The terminal is being built in the traditional territory of the Haisla Nation, a particular challenge for LNG development in Canada. Projects need to not only go through an environmental permitting process with the Canadian and provincial governments, but must also win the support of the First Nations native to the area, which LNG Canada has done. The project is a joint venture involving Shell, Petronas, PetroChina, Mitsubishi, and Korea Gas Corporation (KOGAS). The specific breakdown of the JV partnership and associated LNG volumes is shown in Figure 1 below. Given the terminal’s location, it is not surprising that the project is being developed by three Asian offtakers (dark green shaded rows), an Asian trader (light green row), and a major LNG portfolio player (yellow row). The portfolio volumes will be exported to Asia nearly all the time. The partners took FID on the project in October 2018 and construction is about halfway complete.
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